Item 1. Business
As used
herein, the term “we,” “us,” “our,” and the “Company” refers to Fresh Promise
Foods, Inc., a Nevada corporation and subsidiaries unless otherwise noted.
Overview
We are an insolvent corporation. We have a history of
having no sales revenues, negative cash flow and no profits and we cannot assure that we will ever be successful in generating
and sustaining any sales revenues, positive cash flow or profits at any time in the future. We were originally incorporated in
the State of Delaware under the name, PLR, Inc. in 1993. Later we completed several name changes and reorganizations.
In November 1997, we amended our Articles of Incorporation
to change our name to Integrated Carbonics Corp. We also changed our domicile to the State of Nevada. On July 23, 1999, we again
amended our Articles of Incorporation to change our name to Urbana.ca, Inc. (“URBA”).
And on April
11, 2003, we amended our Articles of Incorporation to change our name to PSPP Holdings, Inc. and later on August 11, 2008 we again
amended our Articles of Incorporation to change our name to Cynosure Holdings, Inc.
On August
21, 2008, we again amended our Articles of Incorporation to change our name to Mod Hospitality, Inc. This was followed by a further
amendment to our Articles of Incorporation on December 16, 2009 wherein we changed our name to Stakool, Inc.
On June 16,
2011, we entered into a Letter of Intent of Sale and Purchase with Anthus Life Corp., a privately held Nevada corporation (“Anthus”).
Subsequently and on July 20, 2011, we and Anthus executed an Agreement of Sale and Purchase whereby Anthus stockholders received
77,588,470 shares of 79,388,470 shares of our then issued and outstanding common stock together with 10,000,000 shares of our
preferred stock in exchange for scheduled payments, totaling $350,000 and 1,300,000 shares of our common stock (the “Anthus
Acquisition Agreement”).
Subsequently,
the Stakool and Anthus Acquisition Agreement was amended effective January 19, 2012 to allow for the issuance of an additional
2,650,000 shares of our common stock to certain parties to acquire all of the then
outstanding
common stock of Anthus. As a result of the Anthus Acquisition Agreement, Anthus became our wholly owne subsidiary and all of
the shares of our preferred stock and common stock were duly issued and the sum of $355,000 was duly paid in accordance with
that agreement.
Anthus was
incorporated in Nevada on June 4, 2009. At the time of the closing of the Anthus Acquisition Agreement, Anthus was a developer
and manufacturer of certain natural and organic food products packaged for consumer consumption. At the time, Anthus had one product
line in the natural food category and others that it believed could be viable commercial products.
However, and in 2013 following our internal financial
evaluations, we terminated the production of the Anthus products in light of our assessment of our limited ability to raise the
additional capital needed to market and sell the Anthus products.
On March 15, 2013 all of our officers and directors resigned
and Mr. Joseph C. Canouse was appointed as our President, Chief Executive Officer, and sole Director
While we believe that our Anthus product line may offer
good value to consumers, we have not undertaken any product or market research to confirm our assessment. Even if the Anthus product
line has strong commercial value, unless or until we have sufficient additional financial and managerial resources needed to undertake
the anticipated additional market research and the manufacturing, marketing, and promotional efforts that would be required to
implement any re-commercialization of the Anthus products, we may not pursue any re-commercialization of the Anthus product line.
In the event that we are successful in obtaining sufficient additional capital, we may, if market conditions are favorable, resume
production of one or more of the Anthus products. However, we cannot assure you that we will obtain the additional capital that
will allow us to undertake these efforts or if we do obtain any additional capital, that it can be obtained on reasonable terms
and in sufficient amounts on a timely basis that will allow us to implement any such efforts at any time in the future.
Effective
August 5, 2013, we completed a 1 for 100 reverse stock split with the result that we reduced the number of our issued and outstanding
common shares from 2,903,888,889 to approximately 29,039,066 (the “First Reverse Stock Split”). Our consolidated financial
statements reflect the First Reverse Stock Split.
On September
26, 2013, we amended our Articles of Incorporation to change our name to Fresh Promise Foods, Inc. The amendment also reduced
the number of authorized shares of our common stock from 4,000,000,000 common shares to 475,000,000 common shares.
On May 13,
2014, we further amended our Articles of Incorporation to increase the authorized shares of our common stock from 475,000,000
common shares to 975,000,000 common shares.
On June 2,
2014, Joseph C. Canouse resigned as Chairman of our Board of Directors and as Chief Financial Officer of the Company, and our
Board of Directors appointed Scott Martin as a Director and Secretary and Mr. Kevin P. Quirk was appointed Chairman of the Board.
On October
16, 2014, we again amended our Articles of Incorporation to increase the number of authorized shares of common stock from 975,000,000
common shares to 2,000,000,000 common shares.
Effective
January 20, 2015, we effected a 1-for-150 reverse split (the “Second Reverse Stock Split”) which as preceded by a
filing of an amendment to our Articles of Incorporation that we completed with the Nevada Secretary of State on December 30, 2014.
On January
6, 2016, we entered into that certain Director Resignation and Release Agreement with Kevin P. Quirk (the “Quirk Release
Agreement”). In accordance with the Quirk Release Agreement, Mr. Quirk resigned from his positions as our Chief Executive
Officer and Director in exchange for our release of Mr. Quirk from certain liabilities.
On July 12,
2016, we again amended our Articles of Incorporation to increase the amount of our authorized common stock from 2,000,000,000
common shares to 5,000,000,000 common shares.
On June 27,
2017, we and Creative Edge Nutrition, a Nevada corporation ("CEN") entered into that certain asset purchase agreement
whereby we acquired certain assets and we assumed certain liabilities of CEN's subsidiary, Giddy Up Energy Products, Inc. ("Giddy").
As consideration, we also agreed to exchange 4,719,760,108 shares of its common stock. On January 24, 2018, we completed the distribution
of its common shares to the CEN shareholders in order to consummate the acquisition of Giddy. Pursuant to the Agreement, the Company
is in the process of spinning out its existing assets and liabilities and assuming Giddy's business plan involving nutritional
supplements and energy drinks focusing on an active lifestyle.
On August
23, 2017, we again amended our Articles of Incorporation to increase the number of authorized shares of common stock from 5,000,000,000
common shares to 9,000,000,000 common shares.
On October
13, 2017, we entered into that certain Director Resignation and Release Agreement with Scott C. Martin (the “Martin Release
Agreement”). In accordance with the Martin Release Agreement, Mr. Martin resigned from his position as our Director in exchange
for our release of Mr. Martin from certain liabilities.
Discontinued
Operations
In light of
our legal proceedings involving certain former management of the Company, we decided to discontinue our business operations of
our wholly-owned subsidiary Harvest Soul. This business was classified as discontinued operations beginning with our December
31, 2015 consolidated financial statements included in this Form 10-K. In August 2018, we executed a definitive agreement to sell
and transfer our equity interest in Harvest Soul.
Our results
of operations related to Harvest Soul have been reclassified as discontinued operations on a retrospective basis for all years
presented. Unless otherwise indicated, the following discussions in this section (Item 1. Business) pertain only to our continuing
operations. For additional information see Note 3 — Discontinued Operations to our consolidated financial statements included
in this Form 10-K.
Current Products, Potential
Product Categories and Product Extensions
We envision the Company as a consumer products company
focused on the health and wellness food and beverage sectors. We also view the Company as a brand acquisition and holding company.
Subject to the constraints and challenges that we face as summarized in our Risk Factors (and elsewhere in this Annual Report),
we may be able to offer products that we believe may provide health and wellness solutions that make sense and fit into the everyday
lives of certain consumer segments. While we have very limited managerial and financial resources, we are focused on three strategic
areas: Food Technology, Consumer Products and Value Added.
We believe that we may be different than many of our competitors
in that if we are able to secure the necessary financial and managerial resources on a timely basis and in sufficient amounts,
we may be able to combine innovative technology and product development with perceptive marketing and sales service strategy.
Currently, we own and operate subsidiaries in green and energy drink markets. See: www.drinkgiddyup.com.
Intellectual
Property
We have no
patented technology and we do not hold any patents that would otherwise serve to provide us with any protection of our intellectual
property rights. However, our products are generally formulated utilizing our own proprietary formulations.
Production,
Sources of Raw Materials and the Names of Principal Suppliers
While our sole corporate officer, Joe E. Poe, Jr. (who
also has other full-time employment and who is not able to devote any full-time efforts to the Company) and our consultants have
reviewed, studied and analyzed the natural and/or organic product market in certain product areas, our strategy is to establish
a product procurement and development program that may allow us to obtain the assistance of marketing professionals. In all of
these efforts we may, if our financial circumstances and market conditions allow, offer us an opportunity to build our business,
create brands through eco-friendly packaging and distinctive labeling, and develop potentially key product distribution relationships
in selected geographic and certain markets that may offer us significant opportunities.
Marketing
Strategy
If we can
successfully implement our business strategy, we seek to have our brand name strongly associated on with high quality products
that attract a strong consumer interest and to focus our efforts on finding and developing complimentary nutritional supplement
products for North America consumer market and beyond.
GIDDY UP Energy
Products is a wholesale manufacturer engaged in marketing and distribution of carbonated and non-carbonated energy drinks, shakes,
energy bars, and related products. All of its manufacturing operations are conducted in accordance with GMP guidelines at GMP
Certified and/or FDA registered facilities. The website at www.giddyupenergyproducts.com.
Overall and
if we are able to obtain sufficient additional financial resources on a timely basis and if market conditions allow, we seek to
become a leader in certain segments of the quality food and beverage business and, in so doing, set the standards of excellence
for food manufacturers as well. We are aware that our products will need to meet very high consumer expectations and provide greater
consumer value in an intensely competitive marketplace where other larger and well-established consumer package goods (CPG) manufacturers
have far greater financial, managerial, and marketing resources than we have and which we may have in the future. We do not anticipate
that competition in the CPG marketplace will decrease at any time in the future. And to the extent that we are able to implement
our strategy and our product and marketing plans, there can be no guarantee that we will gain and later sustain any significant
share of the market and do so while also generating profits and positive cash flow. There are many large national and international
CPG companies that have nearly unlimited financial resources, marketing budgets, research staff, and other resources that are
far beyond any that which we currently have and any that we likely will have in the future.
Our limited
in-house product research has led us to believe that there may be a sufficiently large consumer segment that may be attracted
to our products and the perceived health benefits, product value, and product taste of our products that may allow us to gain
sufficient product distribution and a retail presence in certain geographic markets.
While we have not obtained any independent third-party
evaluation of our plans and strategies, we believe that words like “natural,” “clean label,” “green,”
“eco-friendly”, “organic”, “non-GMO” and “sustainability” may be the new marketing
buzzwords in today’s food and beverage industry. Products and ingredients bearing these tags appear to have created strong
consumer loyalty in certain consumer segments and among significant purchase influencers. We believe that products offered by
the CPG industry that possess natural and naturally derived ingredients are growing at above-market growth rates and that they
offer greater profit potential for food and beverage manufacturers. We also are aware that over the past two decades consumers
have become more health conscious with the result that products that are marketed with these buzzwords and offer good value to
the consumer at an attractive price point attract a loyal segment of the retail market with repeat consumer purchasing behavior.
In that respect, we believe that many of these consumers may also view such products as a heathier choice than similar products
that do not possess these perceived better attributes. Some CPG marketers have also said that such products also promote the consumer
perception that they offer healthiness-on-the-go and beverages thus the perceived consumer value proposition is higher compared
to products in the same product category that do not offer these attributes. We have not undertaken any marketing or product research
and we have not engaged the services of any independent and professional marketing research firm to assist us in evaluating or
developing any of our assessments and we have no present plans to do so. As a result, we may later discover that our plans and
strategies insufficiently and incorrectly mis-identify significant consumer and market trends with the result that we incur protracted
and significant losses with the result that persons who acquire our Common Stock, our Preferred Stock or any other security that
we may issue lose all or substantially all of their investment.
We believe that there may be a sizable segment of the
CPG consumer market that understands and appreciates the “health value” offered by certain products and that this
segment may be willing to pay a premium for CPG products that include health ingredients, which may promote general health and
well- being by preventing certain diseases. This is sometimes referred to as the “health and wellness segment.” However,
we believe that the industry also confronts certain challenges in coping with the demand of natural ingredients used in food and
beverage applications, particularly, in terms of sustainability.
We also believe that this “health and wellness”
CPG segment may continue to increase and that this segment also may offer better profit margin potential as well. And we believe
that consumers are increasingly aware of the incidence of lifestyle-based disorders, such as cardiovascular diseases (CVDs), obesity,
osteoporosis and diabetes, among others. We believe that this general market awareness has served to further the sales growth
and the market share of products that are perceived as natural alternatives since this consumer segment perceives health benefits
that are not available from other CPG products that are not “natural” or “organic.” Other products contain
what some in the CPG industry refer to as “synthetic ingredients” in that they are not “natural” or “organic.”
We believe that this product differentiation has further cautioned consumers and it has allowed products that are marketed under
the “natural” or “organic” moniker to have higher price points and higher margins. Consumers perceive
natural ingredients as having a positive impact on general health, while synthetic ingredients have certain detrimental effects
on health. As a result, food manufacturers have promptly responded to the situation by completely replacing or partially replacing
synthetic ingredients with their natural counterparts.
We also believe that CPG products that are marketed as
offering greater health and benefits products appear to be expanding faster than the overall market in many CPG segments. Thus,
those products appear to be gaining market share. Overall, there are many large, well-established CPG companies that possess a
greater and far more sophisticated understanding of consumer trends and they have significant consumer research capabilities that
far exceeds our current capabilities and those that we likely will have in the future. However, our assessments in all of these
matters are based solely upon the limited evaluations undertaken by our sole officer and director, Joe E. Poe, Jr. who can only
provide services to us on a limited, part-time basis.
Segments
Consumer
Product Group (CPG)
If we are
successful in obtaining sufficient financial, managerial, and marketing resources on reasonable terms and on a timely basis and
provided that market conditions are favorable, we believe that we may be able to implement our business plan in one or more CPG
product segments. In that respect, we may build and in other cases buy certain companies that may offer us attractive acquisition
opportunities in one or more CPG health and wellness food and beverage market segments. While it is difficult to know the extent
of future market conditions and opportunities that may be available, we anticipate that suitable acquisition targets that meet
our investment criteria share a number of common features:
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A concept with substantial,
identifiable consumer demand which can be effectively replicated in multiple markets;
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A unique brand asset
capability that differentiates the company from its competition;
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Attractive business
model economics which address specific customer needs and demonstrate operational capabilities to achieve market leadership;
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Strong management
in place with a proven ability to execute a clearly defined strategic business plan;
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A strong, focused
and customer-oriented culture;
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Significant growth
or growth potential and an expansion strategy that is consistent with the company’s performance history;
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A defensible and
extendable position in a growing industry category.
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We have observed
that beverage products marketed as “a natural energy drink, bursts with flavor and is packed with healthy essential benefits
such as dietary fiber, anti-oxidants, minerals along with vitamin C, vitamin D, B12, B3 and B5 currently attract what appears
to be a strong and loyal consumer following. Some of these products also reference a blend of cherries and pears and the marketing
lines include a suggestion that the product is a crisp pick-me up to satisfy and quench thirst. Such product marketing obviously
requires a sophisticated understanding of consumer needs and the current consumer trends in selected consumer segments.
Competition
We face many large and highly successful and well-established
competitors who have a long history of success in marketing a large and diverse product line in the beverage industry and the
health drink product market segment. These competitors compete in multiple geographic and product markets with the help of internal
and external market CPG research that we will never likely possess at any time in the future. They are well-established, multi-million-dollar
companies that possess a greater and far more sophisticated understanding of consumer trends and they have significant consumer
research capabilities that far exceeds our current capabilities and those that we likely will have in the future. Each of these
competitors also possess sophisticated marketing models, a deep reservoir of experienced distributors and greater market research
capabilities than we will likely ever have. These advantages are augmented with far greater managerial and financial resources
that are far beyond and likely will be far beyond anything that we will ever possess. As a result, any person who acquires our
Common Stock, our Preferred Stock, or any other security that we may issue should be prepared to lose their entire investment.
Employees
At the present time, the Company has one employee who
is also our sole officer and Director, Joe E. Poe, Jr. He also is only able to devote a limited amount of time to the Company
in that he has other full-time employment.
Item 1A.
Risk Factors
Our business is subject to many significant business risks
that are largely beyond our control. We caution you that the following important factors, among others, could cause our actual
results to differ materially from those expressed in forward-looking statements made by us or on our behalf in filings with the
SEC, press releases, communications with investors and oral statements. Our Common Stock and our Preferred Stock should be considered
a “HIGH RISK” investment suitable only for persons who can afford the total loss of their investment.
We have not
attempted to rank any of the risks shown below but we caution you that any investment in our Company involves a substantially
high risk of loss. You should carefully consider the risks described below, before you make any investment decision regarding
our Company. Additional risks and uncertainties, including those generally affecting the market in which we operate or that we
currently deem immaterial, may also impair our business. If any such risks actually materialize, our business, financial condition
and operating results could be adversely affected. In such case, the trading price of our common stock could decline.
The following
risk factors are not exhaustive and the risks discussed herein do not purport to be inclusive of all possible risks but are intended
only as examples of possible investment risks. To facilitate understanding of the various business risks applicable to our Company
and the strategic alliance companies through which we intend to operate our business during the foreseeable future, the risk factors
discussed herein address our Company together with the risks applicable to our operations that we intend to conduct with our strategic
alliance partners.
Risks Related
to our Business and Industry
WE ARE
SUBJECT TO THE RISKS INHERENT IN A NEW BUSINESS VENTURE.
Our most recent balance sheet as of December 31, 2019
shows that our Total Liabilities exceed our Total Assets by over $5.1 million and we have only minimal working capital. As a result,
we are insolvent, and we face a clear risk of bankruptcy and other adverse action by our existing and future creditors. At present,
we have no current definitive plan to raise any significant additional equity capital and we are not aware of any interest of
any underwriter, placement manager or other funding source that has any interest in assisting us in obtaining additional capital.
As a result, we face and continue to face a clear risk of insolvency, bankruptcy, and other adverse action by our existing and
future creditors. This risk is likely to increase over time as we incur additional liabilities.
WE HAVE
NO HISTORY OF PROFITABILITY AND GENERATING POSITIVE CASH FLOW.
We have no
history of generating profits and positive cash flow. As a result, any purchase of our Common Stock is subject the investor to
total loss of their investment resulting from insolvency, bankruptcy, or some other action by our present and future creditors
since our common stock (and our preferred stock) is and will be subordinate to the rights of our existing and future creditors.
NEGATIVE
EQUITY AND ABSENCE OF WORKING CAPITAL.
Our most recent
balance sheet as of December 31, 2019 shows that our Total Liabilities exceed our Total Assets by over $5.0 million and we have
only minimal working capital. As a result, we are insolvent, and we face a clear risk of bankruptcy and other adverse action by
our existing and future creditors. At present, we have no current plan to raise any significant additional equity capital and
we are not aware of any interest of any underwriter, placement manager or other funding source that has any interest in assisting
us in obtaining additional capital. As a result, we face and continue to face a clear risk of insolvency, bankruptcy, and other
adverse action by our existing and future creditors.
NEGATIVE
CASH FLOW.
We do not
have any history of generating and sustaining our operations with a positive cash flow. That is, our operations have been characterized
by negative cash flows whereby our cash disbursements have exceeded our cash receipts. For these and other reasons, any person
who acquires our Common Stock faces a significant risk of loss of their entire investment.
SUBSTANTIAL
LIKELIHOOD OF IMMEDIATE AND SUBSTANTIAL DILUTION.
While we have
no present plans to raise capital and no prospect that any additional capital can be raised in sufficient amounts, on a timely
basis, and on reasonable terms, in the event that any significant additional capital is raised, holders of our common stock face
a substantial likelihood of immediate and substantial dilution of their interests in the company.
ABSENCE
OF CONTROL AND AUTHORIZED “BLANK CHECK” PREFERRED STOCK.
Any person
who acquires our Common Stock will not have any real ability to elect any Director to our Board of Directors or otherwise influence
or control the policies or direction of the Company since we previously issued shares of preferred stock to Joe E. Poe, Jr. and
these shares possess super-voting rights that allows Joe E. Poe, Jr. the unfettered to elect all Directors to our Board of Directors
and thereby control the Company. Our Articles of Incorporation authorize the Company’s Board of Directors to authorize and
issue one or more series of our Preferred Stock each with such rights and privileges as our Board of Directors determines without
the necessity of obtaining any consent or approval of our common stockholders. As a result, holders of our Common Stock have no
real ability to control or influence the Company at any time in the future.
COMMON
STOCK SUBORDINATE TO CLAIMS OF EXISTING AND FUTURE CREDITORS.
All of our
Common Stock is subordinate to the claims and interests of our existing and future creditors and as a result, any person who acquires
our Common Stock is subject to a high risk of the total loss of their investment.
LIMITED
AND SPORADIC TRADING MARKET FOR OUR COMMON STOCK.
Our Common
Stock is traded only on a limited and sporadic basis as an unlisted security on the OTC Market and there is no likelihood that
any liquid trading market will ever develop or if it does develop that any such market can be sustained. As a result, holders
of our Common Stock may find it very difficult to undertake any re-sale of their holdings without incurring a prolonged delay
and likely at a significant discount to observed prices. For these reasons our Common Stock should not be considered a liquid
investment and it is entirely unsuitable for investors who seek to make only liquid investments.
NO LIKELIHOOD
OF DIVIDENDS.
We have no
history of profitability and, for that matter, we have no history of paying any dividends. In the unlikely event that we generate
profits, if any, we anticipate that all such profits will be reinvested into the Company.
ABSENCE
OF WORKERS’ COMPENSATION INSURANCE AND LIMITED INSURANCE COVERAGE.
We do not
have any workers’ compensation insurance coverage. As a result, in the event that any employee of the Company suffers any
personal injury or any property damage while in the employ of the Company or in any capacity as an employee of the Company, we
may be exposed to claims under applicable state laws involving tort claims for personal injury and property damage. The extent
of these claims could range from several tens of thousands of dollars to tens of millions of dollars. In addition, we may be exposed
to claims from the Oklahoma Department of Insurance as well. As a result, the Company is exposed to existential claims that could
result in insolvency and bankruptcy with the further result that persons who acquire our Common Stock could lose their entire
investment.
LIMITED
MANAGERIAL RESOURCES; LACK OF “KEY MAN” INSURANCE.
Currently
we have only one officer, Mr. Joe E. Poe, Jr. who is also our sole Director. As a result, our ability to manage our business effectively
is constrained by the limited amount of our managerial resources and there can be no assurances that we can retain the services
of Mr. Joe E. Poe, Jr. in the future and otherwise attract and retain other experienced, talented, and skilled management talent
necessary to execute our business plan. We have not entered into any employment agreement with Mr. Poe and we have no present
plans to enter into any such agreement. Further, we do not have any “key man” life insurance on the life of Mr. Poe
and we do not anticipate obtaining any such insurance at any time
in the future. The loss of Mr. Poe’s services to the Company would likely result in protracted and serious financial losses
with the high likelihood that stockholders would lose all or nearly all of their investment.
It may be
more difficult for the Company to prepare for and respond to these types of risks and the risks described elsewhere in this Form
10-K than for a company with an established business and operating cash flow. If the Company is not able to manage these risks
successfully, the Company’s operations could be negatively impacted. Due to changing circumstances, the Company may be forced
to change dramatically, or even terminate, its planned operations.
RISKS ASSOCIATED
WITH IMPLEMENTATION OF BUSINESS PLAN.
As a development-stage company, we continue to face substantial
risks, uncertainties, expenses, and difficulties in our efforts to implement our business plan. The extent of these risks is not
known and we have no demonstrable record of operations of any substance upon which anyone can evaluate our business and prospects.
Our prospects must be considered in light of the risks, uncertainties, expenses and difficulties frequently encountered by companies
in their early stages of development. We have not received and we do not anticipate receiving any independent third-party evaluation
of our business strategies or any of our plans and all of our decisions are made by our sole officer and director who can only
devote a limited amount of time to the Company since he has other full-time employment. For these and many other reasons, we cannot
assure any purchaser of our common stock or our preferred stock that it will be successful in implementing our business plan or
otherwise achieving our objectives.
GOING CONCERN
QUALIFICATION AND QUALIFIED AUDITOR’S OPINION.
As a result
of our negative equity, our lack of working capital, and our lack of revenues, our independent auditors have raised substantial
doubt about our ability to continue as a going concern. Given these circumstances, any person who acquires our Common Stock or
our Preferred Stock should be prepared to lose their entire investment.
CHANGES
IN CONSUMER PREFERENCES AND DISCRETIONARY SPENDING MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR REVENUE, RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
We are subject
to shifting and uncertain consumer preferences away from our products. Further we likely will be unable to develop new products
that appeal to consumers, or changes in our product mix that eliminate items popular with some consumers could harm our business.
Also, our success depends to a significant extent on discretionary consumer spending, which is influenced by general economic
conditions and the availability of discretionary income. Accordingly, we may experience declines in revenue during economic downturns
or during periods of uncertainty. Any material decline in the amount of discretionary spending could have a material adverse effect
on our sales, results of operations, business and financial condition.
FLUCTUATIONS
IN VARIOUS COMMODITY, PACKAGING AND SUPPLY COSTS, COULD ADVERSELY AFFECT OUR OPERATING RESULTS.
We are aware that the prices of the main ingredients in
our intended product offerings can be highly volatile. Supplies and prices of the various products that we plan to use to prepare
our products can be affected by a variety of factors, such as weather, seasonal fluctuations, demand, politics and economics in
the producing countries. An increase in pricing of any major ingredients that we use in our products could have a significant
adverse effect on our profitability. In addition; higher diesel prices have, in some cases, resulted in the imposition of surcharges
on the delivery of commodities to distributors. Additionally, higher diesel and gasoline prices may affect our supply costs and
may affect our sales going forward. To help mitigate the risks of volatile commodity prices and to allow greater predictability
in pricing, we hope that we may be able to enter into fixed price or to-be-fixed priced purchase commitments. We cannot assure
you that these activities will be successful or that they will not result in our paying substantially more than would have been
required absent such activities. We do not presently have any multi-year pricing agreements (with fixed processing costs), and
none with guaranteed volume commitments.
We
may not be able to prevent others from using our intellectual property, and may be subject to claims by third parties that we
infringe on their intellectual property.
Our products are created using what we believe may be
proprietary formulations; however, we have no registered patents. Preventing and policing the unauthorized use of our intellectual
property is often difficult and any steps we take may not, in every case, prevent the infringement by unauthorized third parties.
Further, there can be no assurance that our efforts to enforce our rights and protect our intellectual property will be successful.
We may need to resort to litigation to enforce our intellectual property rights, which may result in substantial costs and diversion
of resources and management attention.
Further, although
management does not believe that our products infringe on the intellectual rights of others, there is no assurance that we will
not be the target of infringement or other claims. Such claims, even if not true, could result in significant legal and other
costs and may be a distraction to our management or interrupt our business.
LITIGATION
AND PUBLICITY CONCERNING PRODUCT QUALITY, HEALTH AND OTHER ISSUES, WHICH CAN RESULT IN LIABILITIES AND ALSO CAUSE CONSUMERS TO
AVOID OUR PRODUCTS, WHICH COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS, BUSINESS AND FINANCIAL CONDITION.
We are aware
that the beverage and food service businesses can be adversely affected by litigation and complaints from consumers or government
authorities resulting from food and beverage quality, illness, injury or other health concerns or operating issues stemming from
one retail location or a limited number of retail locations. Adverse publicity about these allegations may negatively affect us,
regardless of whether the allegations are true, by discouraging consumers from buying our products. We could also incur significant
liabilities, if a lawsuit or claim results in a decision against us, or litigation costs, regardless of the result. We do not
carry any product liability and other related insurance and we have no present plans to do so. As a result, we will be directly
exposed to all such claims and any related claims alleging losses due to our products and any asserted related losses with the
consequential result that holders of our Common Stock and our Preferred Stock could easily suffer the total loss of their investment.
BEVERAGE
AND FOOD SAFETY CONCERNS AND INSTANCES OF FOOD-BORNE ILLNESSES COULD HARM OUR CONSUMERS, RESULT IN NEGATIVE PUBLICITY AND CAUSE
THE TEMPORARY CLOSURE OF SOME CONSUMERS’ STORES AND, IN SOME CASES, COULD ADVERSELY AFFECT THE PRICE AND AVAILABILITY OF
FRUITS, ANY OF WHICH COULD HARM OUR BRAND REPUTATION, RESULT IN A DECLINE IN SALES OR AN INCREASE IN COSTS.
While we consider food and beverage safety a top priority
and we may, if sufficient financial resources become available, dedicate substantial resources towards ensuring that consumers
enjoy high-quality, safe and wholesome products there can be no assurance that we may be able to implement any of our plans and
strategies. However, we cannot guarantee that controls and training will be fully effective in preventing all food-borne illnesses.
Furthermore, reliance on third-party suppliers and distributors increases the risk that food-borne illness incidents (such as
E. coli, Hepatitis A, Salmonella or Listeria) could occur outside of our control and at multiple locations. We intend to utilize
High Pressure Processing (HPP) whenever possible to mitigate these risks.
Instances
of food-borne illnesses, whether real or perceived, and whether at our consumers’ stores or those of our competitors, could
harm consumers and otherwise result in negative publicity about us or the products we serve, which could adversely affect sales.
If there is an incident involving consumers’ C-stores and other approved channels serving contaminated products, consumers
may be harmed, our sales may decrease and our brand name may be impaired. If consumers become ill from food-borne illnesses, we
could be forced to temporarily suspend some operations. If we react to negative publicity by changing our products or other key
aspects of the Fresh Promise experience, we may lose consumers who do not accept those changes, and may not be able to attract
enough new consumers to produce the revenue needed to make our operations profitable. In addition, we may have different or additional
competitors for our intended consumers as a result of making any such changes and may not be able to compete successfully against
those competitors. Food safety concerns and instances of food-borne illnesses and injuries caused by food contamination have in
the past, and could in the future, adversely affect the price and availability of affected ingredients and cause consumers to
shift their preferences, particularly if we choose to pass any higher ingredient costs along to consumers. As a result, our costs
may increase and our sales may decline. A decrease in consumer traffic as a result of these health concerns or negative publicity,
or as a result of a change in our products or smoothie experience or a temporary suspension of any of our consumer operations,
could materially harm our business.
THE FOOD
SERVICE INDUSTRY HAS INHERENT OPERATIONAL RISKS THAT MAY NOT BE ADEQUATELY COVERED BY INSURANCE.
We currently do not have any product liability insurance
or any related insurance. If we later acquire any such insurance, we cannot assure you or any holder of our Common Stock that
we will carry sufficient insurance against all risks or that our insurers will pay a particular claim. In that event, any holder
of our Common Stock, our Preferred Stock, or any other security that we issue is exposed to the certain HIGH RISK of loss of their
entire investment. Furthermore, in the future, we may not be able to obtain adequate insurance coverage at reasonable rates for
our operations. We may also be subject to calls, or premiums, in amounts based not only on our own claim records but also the
claim records of all other members of the protection and indemnity associations through which we may receive indemnity insurance
coverage for tort liability. Our insurance policies may also contain deductibles, limitations and exclusions which, although we
may believe are standard in the food service industry, may nevertheless increase our costs.
WE FACE UNCERTAINTY IN OUR EFFORTS TO GAIN AND SUSTAIN
ANY RETAIL DISTRIBUTION OF OUR PLANNED PRODUCTS.
We have not determined if we can achieve any retail distribution
for our planned products and how or where any such distribution may be achieved and, if achieved, that it can be sustained. Since
we have no working capital and we have negative equity, we are not able to predict if and when we may be able to undertake any
efforts to implement our business plan, if ever. In the event that that we are successful in overcoming these and other significant
financial challenges, we are aware that our future results depend on various factors, including successful selection of new markets,
market acceptance of our brands, consumer recognition of the quality of our products and willingness to pay our prices (which
reflect our often-higher ingredient costs,) the quality and performance of our equipment and general economic conditions. In addition,
as with the experience of other retail food and beverage concepts who have tried to expand nationally, we may find that our product
concepts have limited or no appeal to consumers in new markets or we may experience a decline in the popularity of our brands.
We are also aware that any newly opened stores may not succeed, future markets may not be successful and average store revenue
may not meet expectations. Moreover, we anticipate that we may incur significant and protracted losses and negative cash flow
for several years, at a minimum. As a result, investors who acquire our Common Stock, our Preferred Stock, or any security, should
be prepared to lose their entire investment. Our securities should be considered “HIGH RISK” securities.
OUR FAILURE
TO MANAGE OUR GROWTH EFFECTIVELY COULD HARM OUR BUSINESS AND OPERATING RESULTS.
Our plans call for a significant increase in the number
of consumers. Product supply, financial and management controls and information systems may be inadequate to support our expansion.
Managing our growth effectively will require us to continue to enhance these systems, procedures, and controls and to hire, train
and retain management and staff. Since we have only one officer/Director (who has other full-time employment) and no other employees,
we may not respond quickly enough to the changing demands that our expansion will impose on our management, employees and existing
infrastructure. We also place a lot of importance on our culture, which we believe will be an important contributor to our success.
As we grow, however, we may have difficulty maintaining our culture or adapting it sufficiently to meet the needs of our operations.
Our failure to manage our growth effectively could harm our business and operating results with the result that we may face significant
and protracted losses thereby.
OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY
AND COULD FALL BELOW THE EXPECTATIONS OF INVESTORS DUE TO VARIOUS FACTORS.
Our operating results may fluctuate significantly because of various
factors, including:
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1.
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The impact of inclement weather, natural disasters and other calamities, such as earthquakes and/or hurricanes, which could cause a delay in getting our products to our consumers;
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2.
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Unseasonably cold or wet weather conditions could cause a delay in getting our products to our consumers;
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3.
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Profitability of our operations where our products are sold, especially in new markets;
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4.
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Changes in comparable store sales and consumer visits, including the introduction of new product items;
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5.
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Variations in general economic conditions, including those relating to changes in diesel and gasoline prices;
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6.
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Negative publicity about the ingredients we use or the occurrence of food-borne illnesses or other problems at stores where our products are available;
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7.
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Changes in consumer preferences and discretionary spending;
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8.
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Increases in infrastructure costs; and
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9.
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Fluctuation in supply prices.
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Because of
these factors, results for any one quarter are not necessarily indicative of results to be expected for any other quarter or for
any year. Average consumers’ store revenue or comparable store revenue in any particular future period may decrease. In
the future, our operating results may fall below the expectations of investors. In that event, the value of our Common Stock or
other securities would likely decrease.
OUR CONSUMERS
AND SUPPLIERS COULD TAKE ACTIONS THAT HARM OUR REPUTATION AND REDUCE OUR PROFITS.
Consumers
and suppliers are separate entities and are not our employees. Further, we do not exercise control over the day-to-day operations
of our consumers and suppliers. Any operational shortcomings of our consumers and suppliers are likely to be attributed to our
system-wide operations and could adversely affect our reputation and have a direct negative impact on our profits.
OUR REVENUE
IS SUBJECT TO VOLATILITY BASED ON WEATHER AND VARIES BY SEASON.
Seasonal factors
could also cause our revenue to fluctuate from quarter to quarter. Our revenue may be lower during the winter months and the holiday
season and during periods of inclement weather and higher during the spring, summer and fall months. Our revenue will likely also
vary from quarter to quarter as a result of the number of trading days, that is, the number of days in a quarter when stores are
open.
WE COULD
FACE LIABILITY FROM OUR CONSUMERS, SUPPLIERS OR GOVERNMENT.
A consumer,
supplier or government agency may bring legal action against us based on the consumer/ supplier relationships. Various state and
federal laws govern our relationship with consumers and suppliers. If we fail to comply with these laws, we could be liable for
damages to consumers or suppliers and fines or other penalties. Expensive litigation with our consumers/suppliers or government
agencies may adversely affect both our profits and our important relations with our consumer/suppliers.
WE MAY
NOT BE ABLE TO RAISE ADDITIONAL CAPITAL ON ACCEPTABLE TERMS.
We are aware that our business may require significant
capital in the future each year and for many years even if we can implement our business plans. We are also aware that any business
that grows typically has negative cash flow as funds are needed to support higher levels of inventory and receivables together
with higher advertising and marketing expenditures. As a result of these and related circumstances and even if we are successful
in implementing our business plan, any person who acquires our Common Stock or our Preferred Stock will likely suffer significant
and immediate dilution and otherwise become subordinate to the rights and claims of creditors. In addition, any financing that
we obtain may not, however, be available on terms favorable to us, or at all. Our ability to obtain additional funding will be
subject to various factors, including market conditions, our operating performance, lender sentiment and our ability to incur
additional debt in compliance with other contractual restrictions, such as financial covenants under our credit facility. These
factors may make the timing, amount, terms and conditions of additional financings unattractive. Our inability to raise capital
could impede our growth. Any person who acquires our securities should be prepared to lose all of their investment.
THE MARKETING
AND SALE OF A CONSUMER PRODUCT EXPOSES US TO SIGNIFICANT RISK OF LITIGATION TOGETHER WITH THE DISTRACTION OF OUR LIMITED MANAGEMENT,
INCREASING OUR EXPENSES OR SUBJECTING US TO MATERIAL MONEY DAMAGES AND OTHER REMEDIES.
The marketing
of any consumer product is highly risky. We are aware that consumers could file complaints or lawsuits against us alleging that
we are responsible for some illness or injury their consumers suffered at or after a visit to their stores, or that we have problems
with food quality or operations. We are also subject to a variety of other claims arising in the ordinary course of our business,
including personal injury claims, contract claims and claims alleging violations
of federal and state law regarding workplace and employment matters, discrimination and similar matters, and we could become subject
to class action or other lawsuits related to these or different matters in the future. Regardless of whether any claims against
us are valid, or whether we are ultimately held liable, claims may be expensive to defend and may divert time and money away from
our operations and hurt our performance. A judgment significantly in excess of our insurance coverage for any claims could materially
and adversely affect our financial condition or results of operations. Any adverse publicity resulting from these allegations
may also materially and adversely affect our reputation or prospects, which in turn could adversely affect our results. The food
and beverage services industry has been subject to a growing number of claims based on the nutritional content of food products
they sell and disclosure and advertising practices. We have no present plans to obtain insurance coverage for these risks or any
risks associated with or arising out of any product that we plan to market and sell in the future. As a result, in the event that
we incur costs and liabilities as a result of or associated with our planned offering and sale of our products, we likely will
face protracted and significant financial costs and protracted losses thereby with the result that anyone who acquires our Common
Stock or our Preferred Stock likely will lose their entire investment.
WE MAY
ALSO INCUR COSTS RESULTING FROM OTHER SECURITY RISKS WE MAY FACE IN CONNECTION WITH OUR ELECTRONIC PROCESSING AND TRANSMISSION
OF CONFIDENTIAL CONSUMER INFORMATION.
In the event that we are able to implement our business
plan then we are likely to face the risks from using commercially available software and other technologies to provide security
for processing and transmission of consumer credit card data. Our systems could be compromised in the future, which could result
in the misappropriation of consumer information or the disruption of systems. Either of those consequences and other events could
have a material adverse effect on our reputation and business or subject it to additional liabilities with consequential and significant
financial losses arising thereby.
WE ARE
EXPOSED TO INCREASED COSTS AND RISKS ASSOCIATED WITH COMPLIANCE WITH CHANGING LAWS, REGULATIONS AND STANDARDS IN GENERAL, AND
SPECIFICALLY WITH INCREASED AND NEW REGULATION OF CORPORATE GOVERNANCE AND DISCLOSURE STANDARDS.
We expect
to spend an increased amount of management time and external resources to comply with existing and changing laws, regulations
and standards in general, and specifically relating to corporate governance. In particular, Section 404 of the Sarbanes-Oxley
Act of 2002 requires management to annually review and evaluate all of our internal control systems, and file attestations of
the effectiveness of these systems by our management and by our independent auditors. This process may require us to hire additional
personnel and use outside advisory services and result in additional accounting and legal expenses. If in the future our chief
executive officer, chief financial officer or independent auditors determine that our controls over financial reporting are not
effective as defined under Section 404, investor perceptions may be adversely affected and could cause a decline in the value
of our stock. If our independent auditors are unable to provide an unqualified attestation of management’s assessment of
our internal control over financial reporting, or disclaim an ability to issue an attestation, it could result in a loss of investor
confidence in our financial reports, adversely affect our stock value and our ability to access the capital markets or borrow
money. Failure to comply with other existing and changing laws, regulations and standards could also adversely affect the Company.
THE REPORT
OF OUR INDEPENDENT AUDITORS INDICATES UNCERTAINTY CONCERNING OUR ABILITY TO CONTINUE AS A GOING CONCERN AND THIS MAY IMPAIR OUR
ABILITY TO RAISE CAPITAL TO FUND OUR BUSINESS PLAN.
Our independent
auditors have raised substantial doubt about our ability to continue as a going concern. We cannot assure you that this will not
impair our ability to raise capital on attractive terms. Additionally, we cannot assure you that we will ever achieve significant
revenues and therefore remain a going concern.
COMPETITORS
WITH MORE RESOURCES MAY FORCE US OUT OF BUSINESS.
In the event that we have sufficient financial resources,
we anticipate that we will compete with many large and well-established companies, food and beverage service, C-stores and other
approved channels and otherwise, on the basis of taste, quality and price of product offered, consumer service, atmosphere, location
and overall guest experience. Aggressive pricing by our competitors or the entrance of new competitors into our markets could
reduce our revenue and profit margins and otherwise result in significant financial losses that could result in insolvency or
bankruptcy.
WE MAY
NOT BE ABLE TO ATTAIN PROFITABILITY WITHOUT SIGNIFICANT ADDITIONAL FINANCING WHICH MAY BE UNAVAILABLE.
We have negative equity of $5.1 million as of December
31, 2019, minimal working capital and no clear plan to raise additional capital. To date, hawse have funded our operations with
minimal financial resources, and we have not generated sufficient cash from operations to be profitable or to maintain sufficient
inventory. Unless we are successful in generating sufficient revenues to finance operations as a going concern while also achieving
profitability and positive cash flow, the Company may experience liquidity and solvency problems. Such liquidity and solvency
problems may force the Company to cease operations if additional financing is not available.
THE COST
TO MEET OUR REPORTING AND OTHER REQUIREMENTS AS A PUBLIC COMPANY SUBECT TO THE EXCHANGE ACT OF 1934 WILL BE SUBSTANTIAL AND MAY
RESULT IN US HAVING INSUFFICIENT FUNDS TO EXPAND OUR BUSINESS OR EVEN MEET ROUTINE BUSINESS OBLIGATIONS.
Subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended, we will incur ongoing expenses associated with professional fees for accounting, legal,
and a host of other expenses for annual reports and proxy statements that could limit our ability to invest in inventory, accounts
receivable, marketing, product development, and other necessary expenditures. These costs directly reduce any funds that we may
have to meet our financial obligations to creditors or otherwise sustain the existence of the Company.
WE MAY
HAVE DIFFICULTY IN ATTRACTING AND RETAINING MANAGEMENT AND OUTSIDE INDEPENDENT MEMBERS TO OUR BOARD OF DIRECTORS AS A RESULT OF
THEIR CONCERNS RELATING TO THEIR INCREASED PERSONAL EXPOSURE TO LAWSUITS AND STOCKHOLDER CLAIMS BY VIRTUE OF HOLDING THESE POSITIONS
IN A PUBLICLY-HELD COMPANY.
We are aware
that directors and management of publicly-traded corporations are increasingly concerned with the extent of their personal exposure
to lawsuits and stockholder claims, as well as governmental and creditor claims which may be made against them, particularly in
view of recent changes in securities laws imposing additional duties, obligations and liabilities on management and directors.
Due to these perceived risks, directors and management are also becoming increasingly concerned with the availability of directors’
and officers’ liability insurance to pay on a timely basis the costs incurred in defending such claims. We currently do
not carry directors’ and officers’ liability insurance. Directors’ and officers’ liability insurance has
recently become much more expensive and difficult to obtain. If we are unable to provide directors’ and officers’
liability insurance at affordable rates or at all, it may become increasingly more difficult to attract and retain qualified outside
directors to serve on our board of directors.
We may lose
potential independent board members and management candidates to other companies that have greater directors’ and officers’
liability insurance to insure them from liability or to companies that have revenues or have received greater funding to date
which can offer more lucrative compensation packages. The fees of directors are also rising in response to their increased duties,
obligations and liabilities as well as increased exposure to such risks. As a company with a limited operating history and limited
resources, we will have a more difficult time attracting and retaining management and outside independent directors than a more
established company due to these enhanced duties, obligations and liabilities.
WE MAY
NOT ACHIEVE RESULTS SIMILAR TO ANY CURRENT OR FUTURE FINANCIAL PROJECTIONS.
Projections and estimated financial results are based
on estimates and assumptions that are inherently uncertain and, though considered reasonable by us, are subject to significant
business, economic, and competitive uncertainties and contingencies, all of which are difficult to predict and many of which are
beyond our control. Accordingly, there can be no assurance that the projected results will be realized or that actual results
will not be significantly lower than projected. Neither we nor any other person or entity assumes any responsibility for the accuracy
or validity of the projections. All of our plans and projections have not received any independent or third-party evaluation by
anyone and are the result of the limited review provide solely by our one (1) part-time officer and Director, Joe E. Poe.
Risks Related
to an Investment in our Common Stock
OUR DIRECTORS
HAVE THE RIGHT TO AUTHORIZE THE ISSUANCE OF ADDITIONAL SHARES OF OUR PREFERRED STOCK.
Our directors, within the limitations and restrictions
contained in our articles of incorporation and without further action by our stockholders, have the authority to issue shares
of preferred stock from time to time in one or more series and to fix the number of shares and the relative rights, conversion
rights, voting rights, and terms of redemption, liquidation preferences and any other preferences, special rights and qualifications
of any such series. Any issuance of shares of preferred stock could adversely affect the rights of holders of our common stock.
Any such action would also likely and significantly reduce the value of our existing Common Stock and our existing Preferred Stock.
IF THERE
IS A MARKET FOR OUR SECURITIES IN THE FUTURE, OUR STOCK PRICE MAY BE VOLATILE AND ILLIQUID.
We can make
no assurance that there will be a public market for our common Stock in the future. If there is a market for our Common Stock
in the future, we anticipate that such market may be illiquid and might be subject to wide fluctuations in response to several
factors, including, but not limited to the following factors:
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(1)
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actual or anticipated
variations in our results of operations;
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(2)
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our ability or inability
to generate new revenue;
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(3)
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our ability to anticipate
and effectively adapt to a developing market;
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(4)
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our ability to attract,
retain and motivate qualified personnel;
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(5)
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consumer satisfaction
and loyalty;
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(6)
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increased competition;
and
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(7)
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conditions and trends
in the market for organic and natural products.
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CONVERSION
OF OUR PROMISSORY NOTES OR SALES OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK INTO THE PUBLIC MARKET BY SELLING SHAREHOLDERS
MAY CAUSE A REDUCTION IN THE PRICE OF OUR STOCK AND PURCHASERS WHO ACQUIRE SHARES FROM THE SELLING SHAREHOLDERS MAY LOSE SOME
OR ALL OF THEIR INVESTMENTS.
If a market
for our shares develops, sales of a substantial number of shares of our Common Stock in the public market could cause a reduction
in the price of our Common Stock. If selling Shareholders resell a substantial portion of the issued and outstanding shares of
our Common Stock it could have an adverse effect on the price of our Common Stock. As a result of any such decreases in the price
of our Common Stock, purchasers who acquire shares from Selling Shareholders may lose some or all of their investment.
OUR EXISTING
SHAREHOLDERS WILL EXPERIENCE SUBSTANTIAL AND IMMEDIATE DILUTION.
In the event
that we are able to implement our business plan, we will need to raise significant additional capital from the sale of debt, equity,
or both. Any funds, and these funds may not be available on favorable terms, or at all. Furthermore, if we issue debt or equity
securities to raise additional funds, our existing shareholders will experience substantial and immediate dilution, and the new
debt or equity securities may have rights, preference, and privileges senior to those of our existing shareholders. If we cannot
raise funds on acceptable terms, we may not be able to develop or enhance our products, execute our business plan, take advantage
of future opportunities, or respond to competitive pressures or unanticipated consumer requirements.
There is no assurance that we will be profitable, and
we may not be able to successfully develop, manage or market our products and services. We may not be able to attract or retain
qualified executives and technological personnel and our products and services may become obsolete. Government regulation may
hinder our business. Additional dilution in outstanding stock ownership will be incurred due to the issuance of more shares, stock
options, or the exercise of stock options, and other risks inherent in our business.
Since we cannot be assured of any immediate improvement
in our profitability, our cash flow, or both of them, any person who acquires our Common Stock, our Preferred Stock, or any other
security that we may offer, will likely incur substantial dilution and diminution in their interest in the Company and thereby
substantial losses on their investment thereby. Our securities are properly viewed as “HIGH RISK” securities
that are suitable only for those who can afford to lose their entire investment.
Currently,
there is a public market for our securities, but there can be no assurances that the public market will develop further and, if
developed further, it is likely to experience significant price fluctuations.
We have a
trading symbol for our common stock, namely ‘FPFI’. There can be no assurances as to whether:
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the market for our
shares will continue to develop; or
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the prices at which
our common stock will trade;
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Prices for
our common stock will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity
of the market for shares of our common stock, developments affecting our business, including the impact of the factors referred
to elsewhere in these risk factors, investor perception of our Company and general economic and market conditions.
WE ARE
SUBJECT TO THE PENNY SOCK RULES WHICH WILL MAKE OUR COMMON STOCK MORE DIFFICULT TO SELL.
We are subject
to the SEC’s “penny stock” rules because our securities sell below $5.00 per share. The penny stock rules require
broker-dealers to deliver a standardized risk disclosure document prepared by the SEC which provides information about penny stocks
and the nature and level of risks in the penny stock market. The broker-dealer must also provide the customer with current bid
and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson, and monthly account statements
showing the market value of each penny stock held in the customer’s account. In addition, the bid and offer quotations,
and the broker-dealer and salesperson compensation information must be given to the customer orally or in writing prior to completing
the transaction and must be given to the customer in writing before or with the customer’s confirmation.
Furthermore, the penny stock rules require that prior
to a transaction, the broker dealer must make a special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser’s written agreement to the transaction. The penny stock rules are burdensome and
may reduce purchases of any offerings and reduce the trading activity for our securities. As long as our securities are subject
to the penny stock rules, the holders of such securities will find it more difficult to sell their securities and any person who
acquires our securities will not likely have any continuous liquid trading market that will allow them to sell these securities
in the future.
SHARES
ELIGIBLE FOR FUTURE SALE BY OUR CURRENT STOCKHOLDERS MAY ADVERSELY AFFECT OUR STOCK PRICE.
The sale of
a significant number of shares of common stock at any particular time could be difficult to achieve at the market prices prevailing
immediately before such shares are offered. In addition, sales of substantial amounts of common stock, including shares issued
upon the exercise of outstanding options and warrants, under Securities and Exchange Commission Rule 144 or otherwise could adversely
affect the prevailing market price of our common stock and could impair our ability to raise capital at that time through the
sale of our securities.
STATUS
OF “PENNY STOCK” AND IMPACT ON MARKET LIQUIDITY.
Trading
in our Common Stock is limited. Consequently, a shareholder may find it more difficult to dispose of, or to obtain accurate quotations
as to the price of, our Common Stock. In the absence of a security being quoted on NASDAQ, or the Company having $2,000,000 in
net tangible assets, trading in the Common Stock is covered by Rule 3a51-1 promulgated by the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended for non-NASDAQ and non-exchange listed securities. Under such rules,
broker/dealers who recommend such securities to persons other than established customers and accredited investors (generally institutions
with assets in excess of $5,000,000 or individuals with net worth in excess of $1,000,000 or an annual income exceeding $200,000
or $300,000 jointly with their spouse) must make a special written suitability determination for the purchaser and receive the
purchaser's written agreement to a transaction prior to sale. Securities are also exempt from this rule if the market price is
at least $5.00 per share, or for warrants, if the warrants have an exercise price of at least $5.00 per share. The Securities
Enforcement and Penny Stock Reform Act of 1990 requires additional disclosure related to the market for penny stocks and for trades
in any stock defined as a penny stock. The Commission has adopted regulations under such Act which define a penny stock to be
any NASDAQ or non-NASDAQ equity security that has a market price or exercise price of less than $5.00 per share and allow for
the enforcement
against violators of the proposed rules. In addition, unless exempt, the rules require the delivery, prior to any transaction
involving a penny stock, of a disclosure schedule prepared by the Commission explaining important concepts involving a penny stock
market, the nature of such market, terms used in such market, the broker/dealer's duties to the customer, a toll-free telephone
number for inquiries about the broker/dealer's disciplinary history, and the customer's rights and remedies in case of fraud or
abuse in the sale. Disclosure also must be made about commissions payable to both the broker/dealer and the registered representative,
current quotations for the securities, and, if the broker/dealer is the sole market maker, the broker/dealer must disclose this
fact and its control over the market. Monthly statements must be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks. While many NASDAQ stocks are covered by the proposed
definition of penny stock, transactions in NASDAQ stock are exempt from all but the sole market-maker provision for (i) issuers
who have $2,000,000 in tangible assets has been in operation for at least three years ($5,000,000 if the issuer has not been in
continuous operation for three years), (ii) transactions in which the customer is an institutional accredited investor, and (iii)
transactions that are not recommended by the broker/dealer. In addition, transactions in a NASDAQ security directly with the NASDAQ
market maker for such securities, are subject only to the sole market-maker disclosure, and the disclosure with regard to commissions
to be paid to the broker/dealer and the registered representatives. The Company's securities are subject to the above rules on
penny stocks and the market liquidity for the Company's securities could be severely affected by limiting the ability of broker/dealers
to sell the Company's securities.
LIKELIHOOD
OF GOVERNMENTAL APPROVAL OF OUR PRINCIPAL PRODUCTS.
Companies
have been the target of class action lawsuits and other proceedings alleging, among other things, violations of federal and state
workplace and employment laws. Proceedings of this nature, if successful, could result in our payment of substantial damages.
Our results
of operations may be adversely affected by legal or governmental proceedings brought by or on behalf of employees or consumers.
In recent years, a number of companies, including juice companies, have been subject to lawsuits, including class action lawsuits,
alleging violations of federal and state law. A number of these lawsuits have resulted in the payment of substantial awards by
the defendants. Although we are not currently a party to any material class action lawsuits, we could incur substantial damages
and expenses resulting from lawsuits, which would increase the cost of operating the business and decrease the cash available
for other uses.
WE ARE
SUBJECT TO GOVERNMENT AND INDUSTRY REGULATION.
We are subject
to various federal, state and local regulations and we likely will face greater regulations in the future. Our products are subject
to state and local regulation by health, sanitation, food and workplace safety and other agencies. We may experience material
difficulties or failures in obtaining the necessary licenses or approvals for new products which could delay planned execution
of our business plan. We are subject to the U.S. Americans with Disabilities Act and similar state laws that give civil rights
protections to individuals with disabilities in the context of employment, public accommodations and other areas. We may in the
future have to modify office and warehouse space, for example by adding access ramps or redesigning certain architectural fixtures,
to provide service to or make reasonable accommodations for disabled persons. The expenses associated with these modifications
could be material. Our operations are also subject to the U.S. Fair Labor Standards Act, which governs such matters as minimum
wages, overtime and other working conditions, along with the U.S. Americans with Disabilities Act, family leave mandates and a
variety of similar laws enacted by the states that govern these and other employment law matters. In addition, federal proposals
to introduce a system of mandated health insurance and flexible work time and other similar initiatives could, if implemented,
adversely affect our operations. In recent years, there has been an increased legislative, regulatory and consumer focus on nutrition
and advertising practices in the food industry. As a result, we may in the future become subject to initiatives in the area of
nutrition disclosure or advertising, such as requirements to provide information about the nutritional content of our products,
which could increase our expenses.
AS A PUBLIC
COMPANY, WE ARE SUBJECT TO COMPLEX LEGAL AND ACCOUNTING REQUIREMENTS THAT WILL REQUIRE US TO INCUR SIGNIFICANT EXPENSES AND WILL
EXPOSE US TO RISK OF NON-COMPLIANCE.
As a public
company, we are subject to numerous legal and accounting requirements that do not apply to private companies. The cost of compliance
with many of these requirements is material, not only in absolute terms but, more
importantly,
in relation to the overall scope of the operations of a small company. Our relative inexperience with these requirements may increase
the cost of compliance and may also increase the risk that we will fail to comply.
Failure to
comply with these requirements can have numerous adverse consequences including, but not limited to, our inability to file required
periodic reports on a timely basis, loss of market confidence and/or governmental or private actions against us. We cannot assure
you that we will be able to comply with all of these requirements or that the cost of such compliance will not prove to be a substantial
competitive disadvantage vis-à-vis our privately held and larger public competitors.
WE MAY
BE SUBJECT TO SHAREHOLDER LITIGATION, THEREBY DIVERTING OUR RESOURCES THAT MAY HAVE A MATERIAL EFFECT ON OUR PROFITABILITY AND
RESULTS OF OPERATIONS.
As discussed
in the preceding risk factors, the market for our common shares is characterized by significant price volatility when compared
to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite
future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of
volatility in the market price of its securities. We may become the target of similar litigation. Securities litigation will result
in substantial costs and liabilities and will divert management’s attention and resources.